What Is the Limitations on Subcontracting Rule?
The limitations on subcontracting rule caps how much of a set-aside contract a small business can pay other firms to perform. On services, the cap is 50%.
Limitations on subcontracting in plain English
The limits are 50% for services, 50% for supplies (not counting materials), 85% for general construction and 75% for specialty trade work. They're measured in dollars paid to subcontractors against dollars the government pays you.
The rule applies to small business set-asides above $350,000 and to 8(a), HUBZone, WOSB and SDVOSB contracts of any size.
Subcontractors with the same status as you, called similarly situated, count as your side of the work. Breaking the limit can cost you a good performance rating and bring fines.
Related terms
- Set-aside: A set-aside is a contract reserved for small businesses, or for one type of small business such as HUBZone or women-owned firms. Others can't bid.
- Subcontractor: A subcontractor is a business hired by a prime contractor to do part of a government contract. Your customer is the prime, not the agency.
- Prime contractor: A prime contractor is the business that holds a contract directly with the government. It's responsible for all the work, including any it subcontracts.
- Simplified acquisition threshold (SAT): The simplified acquisition threshold (SAT) is $350,000. Federal purchases at or below it can use simpler, faster buying procedures.
Put it to work
Looking for another term? Browse the full glossary or the government contracting glossary guide.